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| 8248532371 | Short Run | Period of time in which Nominal wages + other input costs remain fixed as PL changes | 0 | |
| 8248548020 | Nominal | Real + Inflation | 1 | |
| 8248551175 | Real | Nominal - Inflation | 2 | |
| 8248567613 | Long Run | Nominal wages + other inputs are fully responsive to PL changes | 3 | |
| 8248583492 | LRAS is... | a vertical line at full production/full employment | 4 | |
| 8248622866 | Low inflation | 1-2% | 5 | |
| 8248627441 | Low unemployment | 4-6% | 6 | |
| 8248869101 | Supply Side | - Taxation can affect AS - Lower taxes, encourage Ig, innovation, domestic production -U.S tax system discourages Ig, work, innovation | 7 | |
| 8248912858 | Other Supply Side Arguments | - Tax avoidance (legal) - Tax evasion (illegal) - Reduction of transfer payments [welfare, unemployment] | 8 | |
| 8248968717 | Criticisms | - Little evidence lowering T raise incentives to work Ig and savings - Demand side effects are more immediate [fiscal policy + monetary -> demand side] | 9 | |
| 8249026052 | Disagreements Over 3 Related Questions | - What causes instability in the economy? - Is the economy self correcting? - What should the gov' role be in setting economic policy? | 10 | |
| 8249052429 | Classical Economist | - Adam Smith - Full Employment is normal - "Laissez-fair" policy is best | 11 | |
| 8249065962 | Keynesian Economist | - Capitalism is subject to recessions and depressions - Unemployment is common - Active gov' stabilization policies | 12 | |
| 8249114873 | AS is viewed + located at the full employment level of output | Classical View | 13 | |
| 8249356827 | Prices + Wages are downwardly inflexible | Keynesian View | 14 | |
| 8249125495 | Output does not change in response to price level changes | Classical View | 15 | |
| 8249374331 | Horizontal AS curve (vertical at full emp.) | Keynesian | 16 | |
| 8249133756 | Wages + input prices are flexible | Classical View | 17 | |
| 8249384033 | Decline in output has no affect on price | Keynesian View | 18 | |
| 8249143643 | Say's Law: supply creates demand | Classical View | 19 | |
| 8249390540 | AD is unstable over time | Keynesian View | 20 | |
| 8249258830 | Flexible prices and wages | Classical View | 21 | |
| 8249399461 | Ig is more likely to fluctuate | Keynesian View | 22 | |
| 8249265293 | Money underlines AD | Classical View | 23 | |
| 8249412361 | Active gov' policies are required to stabilize the economy | Keynesian View | 24 | |
| 8249275332 | AD will be stable w/ controlled/limited money growth | Classical View | 25 | |
| 8249877795 | Keynesian View |  | 26 | |
| 8249284551 | AD determines the Price Level | Classical View | 27 | |
| 8249312021 | Money supply changes shift AD | Classical View | 28 | |
| 8249884019 | Classical View economics | | \ | AS | \ | | \ | |_______ _ |_\__AD__________ | 29 | |
| 8250018244 | What Causes Macro Insatiability Views | 1) Mainstream View 2) Monetarist View (Neo-Classical) 3) Real Business Cycle 4) Coordination Failure View | 30 | |
| 8250244421 | What Causes Macro Instability: Mainstream View | - Prevailing perspective of most economist - Keynesian based - Focus on AD ( C+Ig+Xn+G) - Ig: most volatile - Supply side instability - Restrictions: OPEC, wars - Increased production cost | 31 | |
| 8250269271 | What Causes Macro Instability: Monetarist View (Neo-Classical) | - Milton Friedman (Chicago) - Money supply is the focus - Price + wage flexibility fluctuations in product + resource prices, not output and employment - Competitive market will provide stability w/ no gov' - Gov' has caused downward inflexibility - Gov' contributes to business cycle (monetary policy) | 32 | |
| 8250330066 | Equation of Exchange | Money x Velocity (1/MPS) = PQ | 33 | |
| 8250359413 | What Causes Macro Instability: Real Business Cycle View | - Business cycle caused by AS factors *Decrease prod. *Decline of resources - As GDP falls, less demand for money * Decrease in AD | 34 | |
| 8250426833 | What Causes Macro Instability: Coordination Failure View | - No mutually beneficial equilibrium - Households + businesses lack joint coordination | 35 | |
| 8250452776 | Does the Economy Self-Correct? (Neo-C) | Yes | 36 | |
| 8250473734 | 2 Schools of Neo-Classical Thought | - Monetarist - Rational Expectations: adjust to expected changes in economic conditions (RET) | 37 | |
| 8250589731 | Neo-Classical Common Ideas | - Economy is self-correcting - No need for active gov' policies - Flexible prices + wages | 38 | |
| 8250607531 | Neo-Classical Disagreements | - Speed of Adjustment *Monetarist: 2+ yrs *RET: rapidly | 39 | |
| 8250725523 | Mainstream View Disagreements | - Prices and wages ^ - Why? * Wage * Unions - Efficiency wage: minimizes labor cost per unit of output | 40 | |
| 8250795997 | Rules of Discretion: Neo-Classical | - Policy rules would reduce instability - Monetary rule: $supply ^ growth = GDP growth - Balanced budget amendment - Passive fiscal policy - Fiscal policy is ineffective: crowding out - Active policy is ineffective: anticipated | 41 | |
| 8250850866 | Rules of Discretion: Mainstream | - Defend discretionary policy - Velocity of $ is not constant - Opposed balanced budget requirements - Historic Satiability (7-10yrs) | 42 |
